|Previous Section||Home Page|
If the hon. Gentleman has been reading the Library's newspaper cuttings on the bid he will know that the overwhelming majority of financial and economic commentators have come to the conclusion that there is no case on the basis of competition, which is the basis of the Government's policy for references, for a reference to the
Column 1397Monopolies and Mergers Commission. Newspapers as diverse as the Financial Times, the Evening Standard and The Sunday Times have agreed that the bid is not an appropriate case for referral. I hope that my hon. Friend the Minister will agree with that.
My last point relates to the insurance companies that BAT owns, which are different from its industrial and trading companies because there is the question of trusteeship. It is natural, therefore, that some concerns should have been voiced in respect of those subsidiaries. The interests of the insurance companies' policyholders will be unaffected. The bidding company, Hoylake, is committed to dispose of the insurance companies, not to interfere in the management during the process of the disposal, not to increase the payments of dividends and to seek advice from the existing management in establishing the appropriate future for the companies. Hoylake has stated that it has no interest in maintaining a shareholding in the insurance companies and that there can, therefore, be no legitimate concerns about the interests of policyholders and other insurance clients.
The nub of the case for what Hoylake seeks to do is this : the shareholders of BAT should decide whether the offer should succeed or fail. That decision should not be made by Governments or by politicians such as the hon. Member for Pontefract and Castleford and myself, who have little locus standi in this matter. The basis of our free enterprise society is that is it shareholders, and not politicians or management, who have the right and responsibility to determine the basic issues affecting their company. I urge my hon. Friend the Minister to let the market be the test of the bid. In due course the shareholders will be able to judge between the case for Hoylake and the case for BAT and we can leave the future of the company and its employees safely in their hands.
Mr. Gerald Howarth (Cannock and Burntwood) : I join my hon. Friend the Member for Tatton (Mr. Hamilton) in congratulating my hon. Friend the Member for Wokingham (Mr. Redwood) on making his maiden outing today as the Parliamentary Under-Secretary of State for Corporate Affairs. I have an interest in the fact that he has been elevated so early in his life in this place because I have occasionally been mistaken for him. Perhaps I shall continue to bathe in the reflected glory of his meteoric advance.
I thank the hon. Member for Pontefract and Castleford (Mr. Lofthouse) for affording us the opportunity to debate this important matter. I understand the concerns that he has expressed on behalf of his constituents. I hope that we can reassure him that his constituents stand to gain, rather than lose, from the proposals on the table. I, too, find it amusing to see the hon. Gentleman leaping to the defence of an international conglomerate which has, as he said, invested heavily in the United States. Perhaps, after he has heard all the arguments he might join us ; then we should see the repatriation of funds to the United Kingdom.
A number of major British companies might look askance at the claims being made by BAT for its ranking in the league table. British Aerospace, which I know reasonably well, has an enormous number of employees--far more than BAT has in the United Kingdom.
I have no financial or constituency interest in the matter. My only interest is that I regard myself as a friend of Sir James Goldsmith, who has made a significant contribution to the industrial and commercial world.
My hon. Friend the Member for Tatton mentioned the acquisition by BAT last year of the Farmers insurance company in the United States. It was a hard- fought takeover battle, as they often are. During that struggle, Farmers attempted to establish that BAT was not fit and proper to own a United States insurance company. Much of that argument concerned the potential conflict of interest between selling tobacco on the one hand and providing health insurance on the other. In a number of states, the insurance commissioners decided that BAT was not fit and proper. Then, BAT added a very large sum to the price that it was offering for Farmers, and Farmers' management accepted the higher offer. Almost immediately, the insurance commissioners reversed their original verdict thereby demonstrating the ability of management, if it so desires, to convince insurance commissioners. That is important, because BAT is seeking to use the United States insurance commissioners as a means to thwart the offer by Hoylake. This is how it works : in the United Kingdom, the Takeover Panel, which regulates all takeover offers, has set a timetable that governs all such transactions. That timetable determines that the maximum time normally available between the initial offer and the end of the offer is 60 days. If a method can be found to make it impossible for an offer to be completed within the 60 days, the offer will lapse and will not be renewable for 12 months. Therefore, shareholders would have been denied their right to vote.
It seems to many people that that is the purpose of BAT's strategy in using the United States insurance commissioners to delay their approval by more than 60 days. For their part, the United States insurance commissioners have a wholly legitimate responsibility to assess Hoylake, should Hoylake intend to own Farmers or to run it for an interim period. To satisfy the commissioners, Hoylake made it clear that it would form a special trusteeship which would hold the interests in Farmers.
The trustees, who would be leading figures from the insurance industry unconnected with Hoylake, would control Farmers. Their task would be to identify a buyer suitable to the United States regulatory authorities to be responsible for the management of the company during the interim and to distribute dividends no higher than the historic pattern established by Farmers as an independent company. Despite those assurances, BAT's management has attempted to provoke the insurance commissioners to initiate a process that would take more than the 60 days permissible by the United Kingdom Takeover Panel. It is important that the BAT management should fight the matter on its merits and put it to the vote of the
Column 1399shareholders. It should not seek to use what many--certainly I--would regard as an underhand tactic simply to frustrate the due process established by Parliament in the United Kingdom to allow shareholders to reach their verdict. That is an unsavoury aspect of this takeover battle. I accept that all takeovers are a hard and cut-and -thrust business.
As I was leaving the House in the middle of the night, I saw a report on the news tapes that BAT has employed the services of a firm of private detectives called Kroll International. Presumably that has been done at the expense of BAT shareholders. Why have private detectives been employed? Are they to be sent round to bug Sir James Goldsmith, Mr. Packer or Mr. Rothschild? Will they put devices in their cars? That sounds like the sort of thing that my hon. Friend the Member for Torbay (Mr. Allason) might write about.
I understand that Kroll uses the consultancy services of a British journalist called Michael Gillard who works on The Observer and is responsible for the "City Slicker" column in Private Eye --which some of us have known rather more intimately.
In 1979, Mr. Gillard brought an action against Sir James Goldsmith, the chairman of Hoylake, who had described Mr. Gillard as a blackmailer. The case was held before a jury and, after a lengthy hearing of the events, the jury concluded that Sir James Goldsmith was justified in describing Mr. Gillard as a blackmailer. The jury's verdict was unanimous and the verdict was upheld on appeal to the Court of Appeal and to the House of Lords. The case was widely reported at the time and could not have escaped public attention. I am sure that all hon. Members today will be familiar with what happened.
Mr. Lofthouse : Does the hon. Gentleman appreciate that while all this intrigue is going on among the high financiers, some people want nothing more than to earn an honest living and have a job to go to?
Mr. Howarth : I am well aware of that. I am trying to point out to the hon. Gentleman that it is not Sir James Goldsmith and Hoylake who are employing private detectives. The top management of the company that the hon. Gentleman is trying to defend have employed that international firm of private detectives.
Last week another article appeared in the "City Slicker" column in connection with the Hoylake offer. It was distributed on behalf of BAT to the insurance commissioners to stimulate sufficient doubts in their minds to provoke a delay which might take longer than 60 days to resolve and which would thereby thwart the Hoylake bid and deny the shareholders their right to vote. One must ask oneself whether that is the proper action of a major British public company seeking to protect the national interest or whether it is designed to protect the position of the current senior management of the company. It will be evident to most objective people that this is not a frivolous bid but one that many serious commentators view favourably. It is not an asset-stripping exercise, as the hon. Member for Pontefract and Castleford said, but a proposal to the shareholders of BAT for the better management of their assets and the improved performance of the company's constituent parts. That could be in the best interests of the company's employees and the hon. Gentleman's constituents as much as it will be for the benefit of the shareholders. It would be wrong to
Column 1400take any action to deny the shareholders the right to consider and vote on the proposal which, as has been said, is likely to be put to the shareholders early next month.
That is real company democracy. It is not employing private detectives to put bugging devices all over the place, to seek to poison the minds of the insurance commissioners in the United States and to engage in a ploy that is simply delaying tactics to deny shareholders here the right to consider the matter. As the Financial Times concluded on 18 January, on the evidence so far available, it should be left to the shareholders to decide.
Mr. John Garrett (Norwich, South) : Like other hon. Members, I thank my hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) for raising what could become a major issue of industrial policy. Like everybody else, I have no financial interest in BAT, and certainly not in Hoylake, although there is an Argos outlet in my constituency.
Of course, like every other speaker in the debate, I welcome the Minister's debut on this issue. It is a pity that he could not have opened to a larger house, but Opposition Members look forward to hearing the views of a prophet of the free enterprise economy. No doubt he can enlighten us on the latest thinking in the world of prophets on this important development in industrial policy. This case is likely to run and run, if only because of the delays that are becoming apparent from activities in the United States state courts. It is likely to become a landmark case in takeover history. Not only is the proposed £13 billion bid by Hoylake for BAT Industries the largest takeover bid that we have seen in this country, but it has clearly important implications for takeover and merger and, in this case, demerger policy. Therefore, Opposition Members would welcome the Government's preliminary thoughts on the issue. We have heard the free enterprise argument for leaving the bid without the intervention of the Government.
As The Sunday Times quoted on 16 July, in an article headed "Takeover mania",
"No British public company--no matter how large--is now safe from corporate raiders we are in the grip of takeover mania." The size of this bid is not only a matter of public interest but marks the debut in this country of the highly leveraged buy-out, which was developed in the United States, with what most impartial observers would consider to be disastrous results. The Sunday Times article went on :
"America's quoted sector has been ravaged by leveraged buyouts in the past few years--something similar is now expected here." That is why this could be a landmark case. If it proceeds, the floodgates will be opened by similar takeover devices, probably financed from the United States where there is so much more experience of this kind of thing than there is here.
After more than 1,300 leveraged buy-outs in the United States, thousands have lost their jobs, a few have made many millions of dollars and there has been no perceptible improvement in corporate performance or efficiency. A number of studies, including one from the Brookings Institute, which have gone into the consequences of such a development in takeovers in the United States, bear out that contention.
The leveraged buy-out, usually called junk-bond financing in the United States and mezzanine financing in
Column 1401this country--a term which I have only learnt to get my tongue around in the past few days--is really a process of financial manipulation. The process involves issuing bonds where the ratio of debt to security is very high--in other words, a very large loan is made against a rather small security. A leveraged buy-out almost invariably must be followed by a rapid break-up of the victim company, which is usually a diversified conglomerate, with a strong cash flow and undervalued assets. The predator stands to make exceptional gains from the exercise. It is anticipated that Hoylake could make £1 billion out of breaking up BAT. It has been calculated that some 44 of the FTSE 100 companies could be targets ; especially vulnerable are those with strong brand names, the values of which could easily be realised in a dismemberment. I have a number of such firms in my constituency which I will not draw to Sir James Goldsmith's attention by mentioning. It is really just a sophisticated name for asset stripping and one can imagine the turmoil in some of our largest companies as a result. It is likely to stifle any rational planning and development in companies at risk.
Mr. Neil Hamilton : I should like to draw a distinction between classical asset stripping and what is proposed for the BAT bid. Classically, asset stripping is when one breaks up the company and sells off the assets, so that the company no longer exists and the assets are dispersed elsewhere. In effect, what is proposed here is a series of demergers, so that the subsidiary companies remain in existence but are better run, more profitable and, therefore, the jobs are more secure.
Mr. Garrett : I cannot accept the hon. Gentleman's definition, because there was plenty of classical asset stripping in the 1960s, when the companies were not entirely liquidated, but some kind of demerger activity of the kind proposed here was carried on. In the activities of Slater Walker, I believe that was more often the case. Asset stripping usually related to the realisation of real property assets, such as land and buildings. Therefore, it is fair to call this a modern version of asset stripping.
I do not know whether the hon. Member for Tatton (Mr. Hamilton) saw last night's television programme on the career of Mr. Milliken, who is a junk bond guru in the United States, but is now under some suspicion. The hon. Member for Tatton said that there was no suggestion of loss of jobs, but on that television programme a senior executive of Goodyear--which was Sir James Goldsmith's last venture into such an activity--reported that thousands of jobs were lost from that great American industrial company, and Goodyear was lumbered with interest payments of $1 million a day, which had significantly altered the capacity for development of its business.
The predators in such takeovers have no intrinsic interest in the victim company, other than to take a short-term profit from the disposal of its assets. They make no positive or creative contribution to the economy, as United States experience has shown. The arguments that such takeovers shake up sleepy management do not hold water. That is be generally true of takeovers. After all, the DTI's 1988 report on merger policy listed nine separate academic studies which suggested that takeovers generally actually diminish efficiency and profitability.
Column 1402In the main, the people who benefit from such an exercise are the lawyers, the bankers, brokers, accountants, public relations and advertising practices--and now, I hear, private detectives-- who, and I quote The Observer of 16 July,
"hover over the scene like vultures over a mediaeval battlefield." Minorco's bid for Consolidated Goldfields was a quarter the size of the Hoylake bid and generated £50 million in fees for such advisers. Sir James Goldsmith justified his bid by saying that BAT's companies were being stifled under the bureaucracy of a large conglomerate. He does not know whether they are being stifled or not, but the only companies likely to buy Eagle Star insurance group, Allied Dunbar, Farmers group, Argos, Wiggins Teape and other BAT subsidiaries are conglomerates. There will therefore be no diminution in bureacracy, if bureaucracy is the normal condition of a conglomerate.
There is no evidence that the bid will benefit the economy, BAT's 320,000 workers worldwide or its 32,000 workers in the United Kingdom. Indeed, in any unbundling of BAT, many thousands of workers throughout the country may find their jobs at risk, which was the prime concern of my hon. Friend the Member for Pontefract and Castleford.
Another worrying issue is the bid's effect on capital markets. It could lead to our corporate finance system being awash with poor-quality bonds. The issue is not whether the bonds in this takeover are of higher quality than the junk bonds that are customary in the United States, but the principle of establishing whether such a leveraged buy-out is acceptable. One can be sure that poorer-quality bonds will follow the ones that Sir James Goldsmith and Hoylake issue. Of the bid, the Financial Times said that it was
"financed by unquoted IOUs from an off the shelf Bermuda-based shell company."
The Governor of the Bank of England has expressed concern that the development of the leveraged buy-out here could result in "a profusion of unsuccessful financial arrangements."
The bid could introduce massive instability into the British corporate scene. Leverage of the corporate sector debt levels in relation to the capital base has risen steadily in the United States, mainly as a result of the leveraged buy-out boom, so that, at present debt levels, 10 per cent. of United States companies will be acutely vulnerable to a recession on the scale of that in the early 1980s. There is every sign that the BAT bid will pave the way for a flood of big leveraged deals in Britain, making our companies similarly vulnerable. The effect will be to encourage short- termism--to encourage managers to take a short-term view, cutting back on investment and research and development to deter predators, and, after takeovers, maximising cash flow to service excessive debt levels. Corporate planning in anticipation of 1992, for example, could be made extremely difficult.
In our view, the national interest should require that the onus of proof should be reversed in major takeover bids--a point that we made in Committee debates on the Companies Bill, and which we will continue to make when the Bill returns from the other place. The bid should be shown to be in the national interest before being allowed to proceed. The Tebbit doctrine of making the criteria for
Column 1403the takeover of companies relate only to competitiveness is not enough, and it is certainly inadequate in bids such as this. Sir Gordon Borrie, the Director General of Fair Trading, said in December 1986 that takeovers should be required to show benefit to the economy and suggested that reversal of the burden of proof applied to takeovers of a certain size would be a way of tackling the problem of financial markets taking an excessively short-term view. He said :
"The decision to buy or sell particular shares at a particular price does not necessarily bring about the most efficient deployment of and development of the assets which these shares represent." We agree with Sir Gordon Borrie and the Confederation of British Industry that the bid should be referred to the Monopolies and Mergers Commission, first, because of its size--the CBI says that one bid of this size could buy control of 25 per cent. of Britain's manufacturing exports--secondly, because of the creation of a massive amount of corporate debt and dubious instruments of finance and thirdly, because of the endangering of investment in plant and equipment and research and development in many of our large companies--the short-termism argument.
There are many issues of public and corporate interest in this dangerous development, and in our view the Government should refer the bid to the Monopolies and Mergers Commission for mature and careful consideration. As I said, it could be a pacemaking event in corporate finance in this country. It has a number of extremely dangerous implications and it should be considered very carefully, first, by the Government and, secondly, by the Monopolies and Mergers Commission before being allowed to proceed.
The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood) : We have had a good, wide-ranging debate. Although there may not have been many hon. Members present, what was lacking in quantity was certainly made up for in quality. I welcome my hon. Friend the Member for Derby, North (Mr. Knight) to his duties on the Front Bench and thank my two hon. Friends who spoke so kindly about me. I hope that all they said was meant to be praise and I take it in that spirit. I am grateful to the hon. Member for Norwich, South (Mr. Garrett) for his remarks.
The debate has prefigured many of the arguments that will be conducted by the participants in this matter over the next few weeks. I congratulate the hon. Member for Pontefract and Castleford (Mr. Lofthouse) on his success in obtaining this debate on the takeover proposal for it raises an important subject. How will our mergers policy deal with the phenomenon of leveraged or largely debt-financed takeovers? That was the prime concern of the hon. Member for Norwich, South and was mentioned by others. I hope to be able to reassure the House that both our mergers policy and legislation are equipped to deal with such takeovers.
The specific case of BAT is important as it is a large employer wih plants and offices in many parts of the country. It is naturally apprehensive about possible change. The hon. Member for Pontefract and Castleford put his constituents' case well, drawing attention to the importance of Argos as an employer in his constituency.
Column 1404The bid by Hoylake Investments for the BAT group comes under the duty of the director general of Fair Trading. He advises the Secretary of State for Trade and Industry on whether particular mergers should be referred to the Monopolies and Mergers Commission. The director general is considering the proposed acquisition of BAT by Hoylake Investments and will consider any offer document that may emerge. There is no formal offer document that we know of yet. The Secretary of State will take his decision whether or not to refer this particular bid to the MMC in due course and in the light of the director general's advice.
I am sure that the hon. Gentleman will apreciate that it would not be right for me to comment in detail on this particular case, before the director general has advised the Secretary of State. I can assure the hon. Gentleman and the House that, as always, the director general and the Secretary of State will take into account all relevant aspects in the consideration of this proposed acquisition. As the hon. Gentleman knows, the Fair Trading Act 1973 provides for a case-by-case scrutiny of mergers. Each merger or merger proposal which qualifies, because for example, the target company involved is larger than £30 million of assets or because the combined market share of the merged companies would exceed 25 per cent., is considered individually by the director general on its merits, in the light of all the circumstances at the time. Only if a merger is referred to the MMC, and the commission concludes that it would be against the public interest, does my right hon. Friend have powers to take action against that particular merger. Then my right hon. Friend can decide whether to block the bid or not.
I recognise that a particular concern in this case has been registered about the proposed financing of the Hoylake Investments' proposal-- involving extensive borrowing. It has been widely reported that shareholders in the target company, BAT, will be offered not cash but various forms of loan notes, some of which are not secured and which are referred to as "subordinated debt", or to use the more pejorative United States phrase, "junk bonds". If such a bid were to succeed, it seems clear that the new company would have to service a large amount of debt.
But it is not at all clear that the financing of a takeover largely by debt --or "leveraging" as it is called--is likely to evoke a response from the market which diverges from the public interest more generally. One case in particular comes to mind where the financing of merger proposals was considered to raise public interest issues which deserved further investigation by the MMC. This was the Elders proposed takeover of Allied Lyons. In that case the MMC concluded in its report of September 1986 that the proposal would not operate against the public interest.
It found no evidence that the developments of the Allied Lyons businesses that Elders planned to retain would be prejudiced by financial stringency brought on by high capital gearing and low interest cover. The banks providing Elders' loan facility had expressed confidence in Elders' management, and on the basis of the available information, the commission did not think that Elders would make an imprudent future bid. In the event, Elders did not rebid. There have, however, been other cases of leveraged bids where a reference has not been considered appropriate because the Secretary of State considered that the market was best placed to decide on the merits or otherwise of the proposal. Three cases that spring to mind are the
Column 1405Demerger Corporation's bid in 1986 for the Extel Corporation, Valuedale's bid later the same year for Simon Engineering and Barker Dobson's bid for Dee Corporation. In those cases, incidentally, the offers were unsuccessful in the market.
I shall, in this context, quote from the Department of Trade and Industry's blue paper on mergers policy of March last year. It states :
"The consequences of highly-leveraged bids have been a source of concern to some commentators, primarily on the grounds that such bids are often mounted on the basis of plans to break up the target company if the bid is successful. In the typical highly-leveraged case, the bidder will usually need to to sell off parts of the company he has acquired in order to meet the debt obligations he has incurred in financing the bid. Some observers see such post-merger divestment as inherently destructive, and apply the pejorative label asset-stripping to it. On the other hand, others have pointed to the possible benefits of leveraging in subjecting the incumbent managements of even the largest company to the possible threat of takeover and to its associated healthy disciplines, from which they might in practice have been immune without the growth of leveraged financing techniques."
Those two arguments have been mentioned today. The paper continued :
"The Government's view is one of scepticism as to whether there is normally a divergence between the interests of private
decision-makers and the public interest where leverage bids are concerned. Some highly leveraged bids are rejected by shareholders : the market can and does make sensible judgments in rejecting bids where the risks of a high degree of leveraging seem too great. However, where there are profitable opportunities arising from leveraged takeovers followed by break up of the target company, the presumption must be that the profit arises from the assets concerned being put to more efficient and more profitable use than in the original target company, and that this is to the benefit of the economy as a whole. Therefore the Secretary of State will not normally regard high leveraging on its own as a ground for reference. However, he will continue to consider referring such bids when he believes that a high degree of leveraging, combined with other features of the bid, may pose dangers to the public interest." I have quoted from that document at length because it represents a good statement of the Government's position.
That policy was reflected in the reference of the Goodman Fielder Wattie bid for Ranks Hovis McDougall, which was referred in August 1988 because of concern about the possible effects on competition, especially in the market for bread. In the event, Goodman Fielder Wattie withdrew its bid and the reference was laid aside. Concerns have also been expressed about the possible implications of this bid for the insurance industry. Of course, I cannot comment on actions that may or may not take place in the United States. But there are implications in this country, as BAT has a significant financial services group comprising Eagle Star, Allied Dunbar and Farmers.
Column 1406I reassure the House that the legal position, under section 61 of the Insurance Companies Act 1982, is that anyone seeking to become a controller of an insurance company must give the Secretary of State for Trade and Industry prior notice of his intention to do so, and the Secretary of State will then consider whether he is a fit and proper person.
I should also emphasise that were this bid to be successful and were there to be any subsequent transactions resulting from it, each would be considered by the Director General of Fair Trading and the Secretary of State for Trade and Industry in the normal way--that is, individually, on its own merits.
I conclude by emphasising that the main, though not exclusive, consideration in determining whether mergers should be referred to the MMC should be their potential effect on competition in the United Kingdom. The Government's policy enables the great majority of proposed mergers and acquisitions which do not pose a threat to competition to be decided by the market, in the way recommended by my hon. Friends, without intervention from official agencies. The Government believe that there are considerable benefits in allowing freedom for change in corporate ownership and control through mergers and acquisitions. Generally, the market will be a better arbiter than Government of the prospects for the proposed transactions, and will ensure better use of assets, for the benefit of their owners and the economy as a whole. The Government should intervene only where the interests of the decision makers in the market are likely to run counter to the public interest.
The Government take the view that decisions about changes in the ownership or management of a company are generally best taken by the shareholders themselves, as the Government believe that the people best placed to make a judgment of commercial prospects are those whose money is at stake. It is not the role of the Government or statutory agencies to second guess commercial judgments. There may be a case for the public authorities to intervene in particular circumstances, typically where there are grounds for believing that the interests of private decision makers run counter to the public interest. The classic example of this divergence is where a merger confers excessive market power on the new enterprise, so that it offers the prospect of profits to the owners, but threatens to damage the public interest, for example by leading to distortion of the market and exploitation of the customer.
The current procedures for examining qualifying mergers provide a good framework within which to investigate--if necessary by a reference to the MMC--and to control mergers raising public interest issues. The same applies to leveraged offers. Where a high leveraged offer combined with other features might pose dangers to the public interest, we will also, having received the advice of the Director-General of Fair Trading, consider making a reference to the MMC.
Transport is an area with an enormous number of major political questions. The issue of the future route of the A27, together with the expansion of Worthing hospital, are the major issues confronting my constituents at present. I hope that my hon. Friend will understand if I do not elaborate on my congratulations because I stress that the time available to us is very short and I shall understand if he is not able to give a full reply. I thank my hon. Friend for sitting through the long watches of the night, as we have together, while waiting for this debate-- [Interruption.] On the contrary, my hon. Friend has been here as long as I have--and I have been here all night.
This issue has a long history. Some 10 or 12 years ago, a study was carried out--inadequately in my view--which suggested four routes for the A27, none of which was a bypass. A preferred route was announced and a lot of property was bought up. I am happy to say that subsequently I was successful in persuading the Minister to drop that idea and the route was abandoned and the houses sold off. Meanwhile, the traffic has been building up, and back in 1985 the Government decided that a further study should be carried out by Howard Humphries. It resulted in the recommendation of an inner route which, as the posters in my constituency make absolutely clear, is a throughpass not a bypass. I believe profoundly that Worthing should have a real bypass which avoids the town completely.
Indeed, Government policy is that through traffic should be taken away from towns. All the other towns and villages along the south coast are to have real bypasses and it is right that Worthing should have one, too. The strength of public feeling on the matter has been manifested in public meetings and massive petitions of about 24,000 signatures against the route that was selected by the Minister last week, in comparison with one of just over 1,200 in favour of the route selected by the Government. We have had a number of public meetings which, by modern standards, were enormous, with the vast majority of the views expressed being against the preferred route and in favour of a real bypass. I do not think that the assessment that the Government published last week reflecting the Howard Humphries report reflects the strength of public feeling in favour of a bypass and against the preferred route.
My hon. Friend's predecessor was kind enough to receive a deputation, led by the mayor, which spelt out the argument in considerable detail. The borough council thought it right to employ its own consultants, called Atkins, but no relation, I think, to my hon. Friend the Minister, and they drew attention to the serious deficiencies in the Howard Humphries report. The assumption about the speed at which lorries would travel if a bypass were built was far lower than is my experience. Such an assumption tends to bias the decision in favour of the inner route rather than a real bypass. We also believe that the disruption that could be caused to public services
Column 1408such as water, gas and electricity were grossly underestimated. In addition, we have considerable doubts about the traffic forecasts. I regret the preferred route that has been announced. My hon. Friend's predecessor was influenced considerably by the argument that, if he selected the inner route, he would immediately be able to compensate those who were blighted, whereas if he selected the bypass, where there are no properties, those in the inner route would not be formally blighted--
Ms. Joan Ruddock (Lewisham, Deptford) rose --
With regard to the view that was taken by my hon. Friend's predecessor--
Mr. Frank Cook (Stockton, North) : On a point of order, Mr. Deputy Speaker. You will know that I am a member of the Select Committee on Procedure. I am somewhat puzzled that, in a debate on the Consolidated Fund Bill, when many issues are discussed briefly and at some speed throughout the night, and some hon. Members stay throughout the night to ensure that a balanced view is put, when an Opposition view is offered in truncated form, and when a Minister has refused to allow time, such a brief intervention is not allowed.
Mr. Higgins : It is indeed a very short debate. This is traditionally an opportunity for Back Benchers to have their grievances redressed and argued before money is provided to the Government. It is not an Opposition Supply Day.
This is a constituency matter. The Government ought to go ahead with a careful study which will reappraise the Howard Humphries report. It has agreed to reconsider the figures in the light of criticism made by Atkins, and has been prepared to set up a public inquiry. I welcome both.
It is not sufficient, however, simply to revise the traffic forecasts, which have been severely criticised recently by the Public Accounts Committee, which said that the figures have tended to be underestimated and consequently less favourable to a bypass than they now will be. It is also important that a survey of traffic flows should be carried out.
I hope that my hon. Friend will carry out the survey of traffic on the basis of up to date data. The present figures are not up-to-date. It is clear that the bypass would remove traffic going from west to east and east to west, but it would also have a significant effect on traffic going from the north to the east, the east to the north, the north to the west and the west to the north. If the bypass were built, all that traffic would be removed from Findon valley, which is a built-up area in my constituency. If, however, the preferred route is confirmed--I strongly hope that it will not be--traffic will still come through Findon valley, and I believe that that means that the road will have to be made a dual carriageway. If that is so, those costs ought to be included in an appraisal of the economic value of the bypass on the one side and the so-called preferred route on the other. I hope very much that my hon. Friend will examine the figures.
Column 1409Another point of grave concern has been the delay. My constituents whose homes have been threatened do not know at what stage a decision will be reached. They have had a year of serious uncertainty, and clearly it will be some time before the revised figures can be produced and the public inquiry can take place.
I hope that my hon. Friend will make clear the position on blight, and will, if necessary, publish--in addition to the existing leaflets--a summary of where people stand. My impression is that, while those immediately on the route can now apply for a blight notice, those on either side--even if they are most seriously affected--have no prospect of compensation until 12 months after the final decision is made. That, in my view, is quite unfair, not only in this context but in the context of the Channel tunnel and other major developments. Those near to road or rail developments, as opposed to those on the exact route, must receive adequate compensation for the considerable anxiety and personal loss that they suffer. I feel strongly that the present compensation arrangements are inadequate.
Having said that, I welcome the fact that the Government have agreed to reappraise the figures. I hope that they will pay particular attention to the points that I have mentioned, including the additional cost of junctions that would be incurred if the inner route were selected--for example, at Salvington hill. I am, however, pleased that there is to be a public inquiry, which would not have happened 10 years ago. There should be a level playing field in regard to appraisal, and I hope that my hon. Friend will be able to ensure that that happens so that the inner route and the bypass route can be appraised.
The latest document issued by the Department says that figures will also be produced for a bypass route through the Findon gap, which is south of Cissbury Ring. I think that that would have serious disadvantages, not least because of the danger that building would go on up to that line. If the line is north of Cissbury Ring--which I believe is the alternative that we ought to appraise--we shall find that the building is effectively isolated by the existence of Cissbury Ring at that point. We need a clear choice between the route that has been announced as the preferred route and a real bypass, avoiding the town completely, through the Findon gap and north of Cissbury Ring.
The Parliamentary Under-Secretary of State for Transport (Mr. Robert Atkins) : I am extremely grateful to my right hon. Friend theMember for Worthing (Mr. Higgins) for his kind remarks at the beginning of what has-- inevitably and rightly--been essentially a matter affecting his constituency. Not only has my right hon. Friend a distinguished position in the House, but he is chairman of our Back-Bench committee on transport matters.
I hope that Opposition Members will not think me discourteous if I say that time has prevented too many interventions : the restrictions placed on me do not give me such time to answer the debate.
Column 1410nature of such an exchange? It was in fact, only through the courtesy of Opposition Members who truncated the previous debate that this subject was allowed to be discussed at all. There have, in fact, been three discourtesies, and I should like to place that on record.
Ms. Ruddock : I congratulate the Minister on his appointment. Will he tell the House whether the proposal for the bypass has the support of the county council? What environmental damage does he think that the bypass might do to the South Downs?
Mr. Atkins : The hon. Lady will know as well as my right hon. Friend the Member for Worthing that inevitably in all these matters, as I have discovered in the short time that I have been in this post, there are almost as many people in favour of a proposal as there are against. The persuasive powers of my right hon. Friend are such that I shall certainly look at all the submissions, whether from the hon. Lady, with whom I look forward to working, or from my right hon. Friend. We can reassure the people of Worthing who may or may not be affected by the proposals that my predecessor enunciated that their views will be looked at as carefully as possible.
It being Eight o'clock, the motion for the Adjournment of the House lapsed, without Question put.